Current through Register 1531, September 27, 2024
(1)
Initial Net Worth. The Commissioner shall require upon
issuance of an initial license under this chapter that a HMO shall have an
initial adjusted net worth of $1,500,000.
(2)
Ongoing Net
Worth. Except as provided by 211 CMR 43.06(3), the adjusted net
worth of a HMO shall be maintained subsequent to initial licensure in an amount
equal to the greater of the following amounts:
(a) $1,000,000;
(b) 2% of annual premium revenues as reported
on the most recent annual financial statement filed with the Commissioner on
the first $150,000,000 of premium and 1% of annual premium on the premium in
excess of $150,000,000;
(c) An
amount equal to the sum of three months uncovered expenditures as reported on
the most recent financial statement filed with the Commissioner;
(d) An amount equal to the sum of:
1. 8% of annual health care expenditures
except those paid on a capitated basis or managed hospital payment basis as
reported on the most recent financial statement filed with the Commissioner;
and
2. 4% of annual hospital
expenditures paid on a managed hospital payment basis as reported on the most
recent financial statement filed with the Commissioner.
(3) In determining adjusted net
worth, no debt shall be considered fully subordinated unless the subordination
clause is in a form acceptable to the Commissioner, which shall at a minimum
meet the following requirements:
(a) The
effective date, amount, interest and parties involved in such debt are clearly
set forth;
(b) The principal sum
and any interest accrued thereon are subject to and subordinate to all other
liabilities of the HMO, and upon dissolution or liquidation, no payment of any
kind shall be made until all other liabilities of the HMO have been
paid;
(c) The instrument states
that the parties agree that the HMO must obtain written approval from the
Commissioner prior to any payment of interest or repayment of principal;
and
(d) The debt is deemed fully
subordinated by the Commissioner in his or her discretion.
(4) Any debt incurred by a note meeting the
requirements of 211 CMR 43.06(4) shall not be considered a liability and shall
be recorded as equity.
